Research Papers Globalization And Sovereignty

Abstract

Globalization is transforming the contemporary international system. Two major developments have arisen at the expense of the law of the sovereign state. First, specialized regimes of public international law have proliferated into areas previously monopolized by the state, such as human rights, environmental law, and trade law. Second, rules enacted by intergovernmental organizations and transnational corporations have become increasingly prominent. Inevitably, intertwined with these developments is the undermining of the Westphalian constitutional concepts of state sovereignty. Combining the approaches of international political economy and sociolegal theory, this paper contributes to the jurisprudential debate by arguing that globalization is far from the simple negation of sovereignty and state law. Global processes have transformed state law in remarkable ways. At the same time, state law is highly adaptive and plays a significant role in recasting transnational developments. More importantly, the current distinction between global and state law is increasingly blurred in practice. The outcome of these interactions demands a rethinking of what “law” is.

1. Introduction

Since the seventeenth century, the legal framework of the sovereign state has served as the paradigmatic arena for political governance and economic exchange.1 The institution of sovereignty has been constitutionalized on both national and international levels.2 Domestically, it is usually chaneled through a prominent legal fiction, the national constitution, which gives “formal notice that a people had legally and legitimately self-determined their form of self-rule.”3 State law typically claims “final authority” over matters within its territorial jurisdiction.4 Similarly, traditional international rules have been fundamentally concerned with interstate relations and not domestic matters. Public international law's formal insistence on equal sovereign rights both constitutes and guarantees state law's independent constitutional identity and autonomy. However, a number of recent developments have rendered assertions of the absolute juridical sovereignty of state law increasingly problematic. Nonstate actors such as intergovernmental organizations (IGOs), international nongovernmental organizations (INGOs), and transnational corporations (TNCs) have assumed greater political and economic importance in the contemporary world. Many of these nonstate actors have penetrated deeply into national legal systems and contributed “progressively” to the transnationalization of international law.5

The intensification of human interactions and the diffusion of normative structures on a global scale are seemingly irreversible. There is a “wide consensus” that some kind of “erosion” of sovereignty has taken place.6 Many old visions of the Westphalian arrangement are no longer viable; states are no longer the sole legislators and legal enforcers. Two major developments highlight the international legal system's partial withdrawal from its established state-centric orientation and its embrace of globally relevant concerns: the proliferation of specialized regimes of international law, which extend into major domestic policy areas, and the rising prominence of transnational regulatory regimes enacted by nonstate actors. The rise of nonstate regulation of issues previously monopolized by state legal control raises important questions about the future of state law. Will national authorities’ claims to sovereign constitutional autonomy be increasingly marginalized as globalization intensifies? Will the general relevance of state law diminish over time? Will sovereign state legal orders be ultimately replaced by other mechanisms of social control?

This paper argues that the actual impact of globalization on the state's legal apparatus is far more complex than that of simple negation. Global forces are likely to transform state law; however, state law has a remarkable capacity to adapt to different environments and to constrain the actions of transnational actors. The result of these interactions is likely to force a reworking of the concept of “law.” Sections 2 and 3 discuss how the growing prominence of nonstate actors and transnational law7 are changing the face of international law and governance. Section 4 begins with a review of the ambiguous concepts of the sovereign state and state law. It demonstrates that the relationship between domestic, international, transnational, and global institutions is complicated and interwoven. Next, this section analyzes the impact of state legal actors on global and transnational governance and explains the implications for the future of state law. Section 5 concludes.

2. The globalization of international law and governance

2.1. Globalization and sovereignty

Globalization is a rich if ambiguous concept, as well as one of the most difficult modern phenomena to define clearly.8 It is outside the scope of this inquiry to discuss and evaluate the full implications of economic globalization and its critiques. Nonetheless, it is largely uncontroversial to suggest that globalization has exerted an immense impact on the sovereign state. The transnational spread of capital and the formation of global markets entail the replacement of previously fragmented national economies.9 Sovereign states are experiencing increased difficulties in supplying regulatory and redistributive public goods and establishing and enforcing property rights in the face of relatively open trade, rapid information-technology advances, and considerable financial deregulation.10 Additionally, both market relations and political discontent with economic policies have virtually become “borderless.”11

Transnational actors in the form of IGOs, INGOs, TNCs, along with the transnational networks of state agencies, private foundations, and migrants, now play substantial roles on the global stage.12 Apparently, assertions of Hobbesian sovereignty are now impotent.13 The emergence of “sovereignty-free actors” in international governance implies that the currently inadequate state-centric international system is changing in light of new transnational developments.14 International relations theorists disagree on the influence of nonstate actors on state sovereignty.15 Realists tend to be indifferent to the potential challenge posed by nonstate actors to the power of the state. For realists, the success of IGOs, INGOs, and other transnational entities depends heavily on the support of powerful states. Conversely, constructivists hold that nonstate actors have become pivotal transmitters of social structures that condition state action. The standard neoliberal interpretation of globalization sees a decline in state territoriality.16 According to this view, state sovereignty has been “compromised” by the competing interests of nonstate actors like NGOs. Indeed, many national rules barring the movement of labor, goods, services, and capital have been replaced by new institutions that span several territories. However, arguments that nonstate actors are nothing more than agents of power centers or arenas of interstate cooperation, subsidiary to national interests, do not account for the dynamic and often subtle changes they have brought to the belief systems of international society.

Major TNCs, which are largely unconstrained by the legal systems of individual states, now account for a massive proportion of global production.17 Complex economic, humanitarian, health, and environmental problems no longer heed the artificial boundaries imposed by states.18 As expected, the rapid growth of effective political and economic institutions beyond the national government is unprecedented.19 Intensified exchanges in commerce, migration, technology, and culture have increased the interdependence of states.20 Economies have become subordinate to international power more than to state regulation.21 International problems are often too complicated to be effectively resolved by individual national governments.22 State and nonstate actors are increasingly linked in new partnership arrangements that “compress the national interest with economic interest.”23 Diverse entities, ranging from powerful TNCs to previously marginalized grassroots actors, are now capable of posing formidable challenges to state-control policies.24 In short, the state is “obliged” to share power with other groups within complicated, multilayered networks of political power.25

It is tempting to accept that the relationship between the global and the local is inherently paradoxical.26 However, this is not entirely accurate. The two are not merely opposing forces; they may also be mutually reinforcing partners.27 Assertions that transnational developments are wholly concerned with the modern state's loss of control over the migration of capital and people are largely mistaken. It should be recalled that the elevation of the constitutional state, to its current legally supreme position in the international system, is itself a transnational occurrence. The spread of the sovereign nation-state as a dominant form of political association from Western Europe to most of the world in the past three hundred years is an example of “global interconnectedness.”28

2.2. The need for pluralist legal perspectives

The entrenched vision of law as a “uniform and monopolistic” set of rules that governs a given community is currently experiencing a collapse.29 To approach legal phenomena pluralistically—from the multiplicity of “global, international, transnational, regional, inter-communal, municipal, substate and non-state local” perspectives—enhances our understanding of the globalization of international governance.30 A “useful” legal pluralism should recognize the importance of state law but refrain from assuming that everything is inferior to it.31 State law should be neither understood as the supreme system of social ordering nor simply seen as parallel to other legal orders. The relationship between the law of the state and other normative structures is crucial to the understanding of legal phenomena as a whole.32

Contemporary jurisprudential scholars, such as H. L. A. Hart, John Rawls, Ronald Dworkin, Hans Kelsen, and Joseph Raz, remain too focused on scholarly approaches that concentrate excessively on formal state legal norms.33 In particular, Hart and Kelsen are largely against the notions of legal pluralism and nonstate law.34 Many professional lawyers rely on the primacy of the “closed systems” of state law as the “regulator of social relations.”35 Mainstream social-science writings on globalization often neglect the role of law. However, legal academia tends to emphasize the role of legal forces to the detriment of globalization.36 As such, legal pluralism, which recognizes the coexistence of multiple legal orders within the same social space, has become more important than ever.37

Long before globalization was put under the spotlight, “constellations of legal pluralisms” were already in existence.38 Independent and mutually recognizing legal orders predated the constitutional framework of the modern state. For example, the laws of the Holy Roman Empire were of a “pre-state” and “transboundary organizational form.”39 The predecessor of the modern German state was not a “nation” but a patchwork of politically linked territories of imperial electors and princes within the overarching constitutional structure of the empire.40 The implementation of the empire's law was left in the hands of the monarchs of small and medium-size kingdoms,41 who were active in making their own laws. By the sixteenth century, the seven-hundred-year-old empire had issued its own legal regulations,42 running concurrently with the legislative activities of the constituent countries and without stimulating any major legal conflict that could bring the imperial constitutional system to a breaking point. This was not an isolated phenomenon. What makes present-day transnational legal pluralism different from this older form of legal pluralism is the former's rejection of the idea that law must always be formally identifiable with the activities of the nation, the state, or the government.43

Marc Hertogh identifies “three waves” of nonstate legal development: colonialism, domestic legal pluralism, and globalization.44 As he argues, without reliable historical baselines for comparison, it is difficult to determine empirically whether more nonstate law exists than before. Nevertheless, it is certain that since the advent of modernity, people have become accustomed to adopting state law as the standard paradigm for legal phenomena. This may explain why the increasing visibility of nonstate law is often surprising. For instance, the regulatory system of domain names arose from the decisions of managers and engineers of internet companies, not public authorities.

2.3. The global transformation of international law

Before the end of the Second World War, legally speaking, states were “sovereign in an almost absolute sense, exercising supreme authority.”45 When the Westphalian doctrine of absolute sovereignty was prevalent in the late nineteenth and early twentieth century, it was commonly assumed that the autonomous decisional powers of constitutionally independent sovereign states could not and would not be weakened by their activities in international institutions.46 International law was essentially concerned with forestalling conflicts and confirming the independence of municipal jurisdictions. Sovereign states in the post-1945 world began to make use of mutual consent to establish institutions that, paradoxically, limited the exercise of sovereignty. Although public international law is likely to endure as a normative “horizontal form of cooperation,” there are compelling signs that it is gradually moving away from the restrictions imposed by state-centric principles.47 In particular, its dyadic mode of organization is undergoing a process of “thickening” into a triadic architecture in which third-party, nonstate actors, such as IGOs, arbitration panels, and international courts, have a greater role.48

Currently, the state cannot ignore issues related to the wider interests of humanity, even within its own borders. Individuals and groups enjoy greater recognition as subjects of international law, as seen in the expansion of legal regimes and enforceable mechanisms in the fields of international human rights law, international refugee law, and international criminal law.49 Victor Peskin observes that the United Nations Security Council's ad hoc tribunals for the former Yugoslavia and Rwanda “continued to trump state sovereignty insofar as targeted states and all other UN members were legally bound to comply.”50 However, the development of international criminal tribunals suggests a “changing balance of tribunal authority and state sovereignty.” He criticizes the “next generation” of war crimes tribunals as supporting the expansion of the influence of state judicial actors as well as the strengthening of the doctrine of sovereignty.

The Rome statute of the International Criminal Court (ICC) upholds the principle of complementarity and recognizes that states do not have to collaborate with the court unless they have ratified the statute. However, this is only part of the picture. The establishment of special hybrid courts in Cambodia, East Timor, Lebanon, and Sierra Leone means that states no longer see sovereign state law alone as a sufficient means of punishing serious war crimes. The decisions of international judges and prosecutors now permeate and shape the domestic criminal law of these countries. William Burke-White further asserts that the ICC has become “part of a system of multilevel global governance” through its alteration of state preferences and policies and its deterrence of future crimes through judicial and prosecutorial pronouncements.51

International law has evolved into a central framework for the “emergent system” of global governance. This system supplies the normative mechanisms for the establishment of IGOs and the facilitation of the international response to issues as diverse as nuclear proliferation, climate change, ocean use, and the functioning of the world trade system.52 Alexandra Khrebtukova insightfully points out, “[n]ational borders no longer confine the diverse views that prioritize subjects of international law … . different perspectives are often less identifiable with specific states than with discrete branches of the law, each manifesting separate functional perceptions of what that law should take as its primary focus.”53 The “deformalized” management of international affairs and the multiplicity of IGOs, international tribunals, and INGOs have severely undermined the classical notion of international law as the only legal regime governing the interactions of states and peoples.54 Currently, public international law is experiencing a “fragmentation” of its branches.55 Interstate treaties are no longer the only influential international legal instruments. Deformalization has triggered an explosion of uncoordinated, specialized legal instruments that rely heavily on experts, specialists, and groups.56 Pragmatic nonstate actors have also contributed significantly to the reinterpretation, redefinition, and elaboration of international norms. This has substantially extended the ambit of the otherwise self-possessed regimes of international environmental law, international economic law, international humanitarian law, and international investment law, to name a few.

Transnational processes have produced a new conception of “global law.”57 For Pierrick Le Goff, globalized legal norms, which deal mainly with the political economy, are different from public and private international law in scope and purpose, and they are conceptually broader than commercial transnational law.58 A “malleable” set of norms, driven by professionals, may eventually succeed in constructing a stronger worldwide political order.59 The notion of global law represents a “multicultural, multinational, and multidisciplinary” occurrence, not a formalized legal system.60 Accordingly, converging international practices and developing regimes on a global scale, such as international environmental or trade laws, can be regarded as components of the concept of the global law, broadly defined. Globally relevant legal rules do not rest on one regime, one territory, or one branch of law but on “invisible” colleges, markets, professionals, and networks that transcend nations. Its “organizational backbone” is not a unitary world government but an “anarchical array” of fragmented transnational networks connecting bureaucracies, agencies, and organizations.61 From this perspective, the rise of global law is largely independent of the nation-state.62

However, the line between global and local is not always clear. Werner Menski correctly notes that law—state-made or not—is inherently a “global phenomenon” because the “basic constituents of ethical values, social norms, and state rules,” with the appearance of “myriad cultural-specific variations,” are actually located in all corners of the world.63 The increased citation of judgments and borrowing of legal doctrines from international and foreign courts by domestic judges is a concrete sign of a developing transnational legal culture. The ongoing codification and harmonization of law on the international plane is beneficial to lawyers who work for cross-border causes.64 Global law is not confined to a particular field or area between or beyond states.

Transnational law can be understood as a kind of global law with a smaller spatial coverage.65 One of its core objectives is to foster “cooperation” beyond political and geographical boundaries.66 Unlike state law, transnational law is not formulated in domestic legislatures and courts but in new arenas outside of the regulatory influence of any individual state. Today, the establishment and interpretation of transnational norms have become “pluralized.”67 Many transnational, rule-based activities are associated with networks of governmental agencies, commerce, NGOs, social movements, IGOs, and legal professionals. Informal rule systems and economic influences sometimes “supersede” state-driven international law in structuring the global political economy.68 Fields of rising importance include cyber law, procurement, and transitional justice.69

3. The rise of transnational law

3.1. Private transnational law

The prevailing role of sovereign state law in the regulation of cross-border economic transactions is increasingly at odds with flourishing regional and global economies. In response to the regulatory fragmentation of the world market, the international business community has developed a common set of rules intended to reduce costs.70 The lex mercatoria, or merchant law, is one of the most notable models of private transnational law. Its roots can be traced back to the Middle Ages. The medieval lex mercatoria was a European transnational custom that underwent a process of domestication in history. It was absorbed into English domestic common law and then transplanted to the United States's legal system, where it was later codified. Finally, as an outcome of the uploading of legal norms from the state to the international sphere, its principles became part of commercial treaty law.71

Modern lex mercatoria is a self-governing, nonstate legal order that is tailor-made for the resolution of transnational commercial disputes. It blends “trade usages, model contracts, standard clauses, general principles, international commercial arbitration with a body of expert legal writing” into a coherent and precise body of norms.72 As the legal foundation of global capitalism, it offers business people from dissimilar cultural backgrounds a common language to transact stably and predictably.73 Multinational corporations now use standardized contract forms and conditions, which are recognized by the participants of global business and not by officials of the sovereign state.

Much of transnational law is deeply fragmented. Despite the considerable success of modern merchant law in building a new transnational legal culture, it is fundamentally an Anglo-American and European phenomenon.74 Arbitral bodies, widely considered superior to their national counterparts in dealing with cross-border problems, continue to serve as the chief institutions for resolving transnational commercial disputes in many parts of the world. Moreover, transnational legal regimes are specialized and uncoordinated. A budding lex sportive internationalis regulates conflicts associated with the Olympic Games, and a lex constructionis is increasingly influential in transnational construction contracts.75 The Forestry Stewardship Council is another relevant nonstate institution that systematically enforces norms for national environmental conditions.76 Yet another form of transnational law exists in the spread of highly localized religious and customary laws from one country to another because of migration, the internet and the influence of media, social movements, and NGOs.77 A notable example is the state-recognized usage of Islamic law by minority communities in predominantly Christian nations.

3.2. International institutional law as public transnational law

The beginning of the twenty-first century witnessed the proliferation of international institutions that altered the traditional politics of interstate relations.78 The World Trade Organization (WTO), for instance, actively promoted a fundamental set of rules and procedures for the regulation of the global economy. The WTO's expansive elaboration of legal norms through dispute-resolution processes has gradually constituted a legal order that is independent of the states parties.79 Responding to the 9/11 attacks, the UN Security Council enacted a series of resolutions that gradually developed into a growing corpus of legal norms as well as a “global system of standards, expectations, reporting, and assessment” demanding universal state action against acts of terrorism.80

Vertical supranationalism, another sign of the globalization of the international system, is playing an ever-more explicit role in the traditionally horizontal regime of public international law. International human rights law is a clear example of law that claims universal authority over all states and peoples. The European Union (EU) is notable for producing binding supranational law in diverse areas like agriculture, competition policy, energy, human rights, monetary affairs, public health, security, and trade.81 EU law claims authority over a number of sovereign states at the same time, and domestic legal authorities throughout Europe notably accept its validity. Jürgen Habermas sees this cosmopolitan development on the regional level as positively steering peoples toward a “constitutionalized world society,” though he rightly cautions that nation-states will still have an important role to play in the globalizing world.82

The expansion of IGO rule making, treaty interpretation, and dispute-settlement power has effectively turned IGOs into self-contained legal and political communities.83 Continuous state consent is no longer possible for the authorization of the massive number of IGO legislative actions. In addition, IGOs have seized opportunities to decide the content of major international norms and to induce states to act consistently with their preferred interpretations.84 Many IGOs are capable of disseminating new rules in the international community.85 Therefore, IGOs can be seen as key proponents of the legalization of international governance.86 The assignment of legal implementation, interpretation, and conflict management responsibilities to IGOs contributes significantly to the divergence of international bureaucratic interests from those of their state political masters.

Furthermore, international tribunals have become centers for coordinating policies at the global and regional level, from trade and monetary issues to labor standards and environmental pollution.87 In effect, international courts add value to international governance by providing important information about whether a policy or action is permissible under the norms of the existing international political structure.88 This enables transnational judicial actors to manufacture new norms in the name of law clarification, to shape the expectations of other international actors, and to indirectly condition the behavior of state actors in the future.

Moreover, the progression of “transgovernmental regulation networks” has led to the emergence of a common, if not yet unified, set of principles governing administrative functions in areas such as security, banking, intellectual property, and investment.89 Similar shared principles seem to be developing in the area of international adjudication as well.90 Another outcome of transnational legal cross-fertilization is that international courts are behaving increasingly alike in their judgments on an assortment of matters, including the rules of evidence, provisional measures, judicial interpretation, and remedies.

However, the rise of global law does not necessarily imply that a common law of humanity is in the making. Domestic legal systems are likely to develop similarities, though differences in cultural, religious, and legal dimensions will remain. An example is family law, which is rooted in profoundly local social customs and conscience.91 The emergence of a global law on social security or religious practice is equally inconceivable, at least in the foreseeable future. Moreover, universal norms that aspire to cover the entirety of the human race are problematic. The Universal Declaration of Human Rights is, at times, troubled by contradictory conceptions of local human rights as well as conflicting legal norms of free trade.92 A unitary system of global law is unlikely to result from the current worldwide diffusion of legal phenomena.93 It is doubtful that the international community would agree to follow one rule system, one language, one culture, or one law.94 In this world, the coexistence and overlapping of different norms does not eliminate local distinctiveness.

4. The reformulation of sovereign state law

4.1. The sovereign state

States and their governments should not be taken for granted; they are no more than abstractions of social life.95 Indeed, the ideas of “state,” “sovereignty,” “law,” and “national interests” are unstable and intersubjective concepts. They are mental constructs that exist wholly in the human mind.96 According to Alexander Wendt, sovereignty is not only “a property of individual states” but also “an institution shared by many states” and characterized by a common expectation that “states will not try to take away each other's life and liberty.”97 As Andrew Hurrell points out, “sovereignty can only be meaningful if it is recognized by others.”98 Hence, traditional public international law and the state are in a symbiotic relationship. The former defines the latter, and the latter constitutes the former.

In practice, however, the status of official UN membership conceals “wide variations” among states.99 Formal sovereign equality does not erase the immense disparities between states in terms of economic wealth, military power, territory, population, and the ability to exercise political and legal influence in the international community.100 It is thus “terribly misleading” to call all states and their nominal leaders equal “sovereigns.”101 Corrupted and brutal military regimes do not differ much from organized groups of criminal gangsters.102 For most of its existence, state power has been fragmented or ineffective in many areas of control and in many countries. Many national political regimes do not even control the whole of their claimed territories. At any rate, it is highly doubtful that the state has ever been as powerful as many—including those who hold that global forces necessarily weaken the domestic polity—believe.

Nonetheless, the sovereign state, as a powerful constellation of organized political institutions, is deeply entrenched. It perseveres in the minds of many as a defining element of political identity. A host of factors supports the argument that the modern state is likely to retain its role as a prominent form of political association, at least for the foreseeable future. States are the only “effective authorities” in the exercise of military might.103 The contest for national resources continues to be a “crucial factor” that affects “struggles at other geographical and political levels.”104 The ability of state bureaucracies to exercise substantial control over their citizens through the practices of policing, judging, and administering remains largely intact, even in a so-called era of “global governance.”105

In addition, domestic polities are able to simultaneously exploit the economic profits of globalization while maintaining core belief systems, such as nationalism, to promote social relationships.106 Governments play crucial roles in structuring the relatively new relationship between the global market and civil society.107 Identities and “human consciousness” are often shaped by the very existence of state borders.108 In this respect, national ideological constructs are much more important than any form of global awareness in conditioning people's concepts of who they are.

Formally, states refuse to acknowledge any higher juridical authority. However, this does not prevent state officials from utilizing global discourse as an instrument to consolidate their rule. The public belief that sovereignty is under stress actually provides officials and lawyers with fuel to shift the blame to transnational forces.109 Occasionally, national politicians manipulate exaggerated accounts of transnational influences to reassure voters that they are doing the “right thing.”110 The discourse of “constraint or absence of choice” and the “withering” of sovereignty enable national policy makers to pursue greater power on behalf of the state.111

4.2. State law and nonstate legal orders

States are governed by elites, who are, of course, human beings. When humans communicate, they inevitably express whether something is acceptable or not,112 in various formats and with varying levels of preciseness.113 As such, state politicians and bureaucrats unavoidably make rules in the course of discharging their duties. The foundations of the modern constitutional state rest on the assumption that people can be politically ruled under rational authoritative propositions that speak, argue, command, and justify in the language of law.114 Public policy is justified in rational-legal terms.115 Philip Bobbitt indicates that there is probably no state without law.116 Domestic law is a normative structure through which modern states are politically constructed and governed.

For John Austin, the nineteenth-century English legal positivist, state law is equivalent to the imperative of the sovereign. Thus, it is all that a jurisprudent should study.117 Another leading positivist, H. L. A. Hart, conceptualized law as the combination of primary and secondary rules authorized by a “rule of recognition.”118 If we assume that the constitutional design and political-economic conditions of each state are somehow unique, there cannot be a single model of state law. State law serves a variety of purposes. He asserts that it is implausible for law to emerge until the state has attained a legitimate use of violence. Additionally, the state needs law to justify the fight against foreign interference.119 Brian Tamanaha describes state law as a “preeminent form of law.” 120 Because of the special position occupied by the state in the international political space, state law has the “distinctive” ability to accomplish a wide spectrum of plausible goals and operations.

Sovereign state law provides domestic authorities with the political legitimacy that makes the effective use of coercive force possible. Law and politics give shape and substance to each other.121 State law is not merely a body of technical rules imposed on individuals by those who dominate the formal lawmaking process. It is also an important integrative force in modern societies.122 This echoes the earlier view of Durkheim that law, while at times oppressive, consistently functions to hold individuals and groups together. Weber also treats law as a tool in the governing of complicated socioeconomic interactions.123 Gramsci's perspective on the subject is more skeptical. He argues that domestic law has much to offer the state that wants to disseminate its official worldview and discourage other undesirable and politically incorrect customs and understandings.124

Global political authority will likely remain fragmented for the near future. It is true that “global governance institutions,” such as the WTO, the World Bank, the International Monetary Fund (IMF), the ICC, and transnational networks of judges, regulators, and environmental policy makers, claim and exercise the authority to enforce universal rules. However, they do not seek to “perform anything approaching [the] full range of governmental functions” or to “monopolize the legitimate use of violence within a territory.”125 These central functions of sovereign state law are not yet replaceable. States are likely to retain their roles as the “unique vectors of law creation and enforcement” that focus on the preservation of regional diversity, which cannot be guaranteed on a global scale.126 The vast array of local problems around the world presupposes that a centralized global regulative authority is largely impossible.

Global legal norms and actors are understandably less responsive to local social complications than are their domestic counterparts. In this respect, sovereign state law is still prominent, even with the globalization of the international legal order. National law's values and doctrines typically have strong historic ties to the governed communities, and its practices are institutionalized in politics and society. Within the state, law ensures legitimacy through successive historical experiments. As a relatively young regime, transnational law has yet to experience a comparable period of development. This development is necessary because the moral legitimacy of transnational law lies in fluid communities and networks, not consolidated institutions.127 Hence, it is irrelevant whether the claims of state sovereignty to absolute supremacy are true. Rather, it is the durability of state law that matters.

The profusion of globally focused human rights principles, extraterritorial enforcement arrangements, and economic rules has paradoxically modified the reach of state law.128 Globalization is not a unidirectional, exogenous force acting on the laws of sovereign states. In fact, state legal actors are highly relevant in the development of global and transnational regulatory rules. Municipal courts are becoming “global governors,” as they regularly deliver judgments with extensive normative implications on transnational actors.129 In the U.S. alone, thousands of transnational disputes are resolved in the federal courts every year. Judicial decisions of this sort inevitably “allocate resources” among transnational litigants in stipulating legal jurisdiction in various cross-border cases. Domestic court proceedings provide transnational actors with crucial and influential information that shapes their strategic behavior.130 The ability of state law to forge daily “human imagination” has made localities “veritable partners” in the global order.131 Some writers claim that the legal institutions of sovereign states play a “critical role” in developing the rules that govern economic activities, both local and global.132

Transnational processes are exceptionally complex. Nonstate actors do not automatically emerge. States do not naturally compromise their political reach. In many cases, transnational coalitions stem from domestic politics. They may be the offshoots of strategic partnerships between specialized domestic bureaucracies, business corporations, civil society organizations, and other public authorities, often with an aim of overcoming political opposition within national governments and legislatures.133 Transnational law is not a wholly new invention. It derives principles, terminologies, and ideas from other normative systems, especially sovereign state law.

Most transnational legal practitioners and international judges who devise and carry out nonstate legal norms received their basic professional training in national law schools, and most are qualified in at least one domestic jurisdiction. There is no established transnational law school in any meaningful sense. The same people also appear before municipal courts that apply state law. High-ranking national judges meet regularly in international conferences and serve with others on transnational bodies. Additionally, numerous transnational legal actors are the same judges, lawyers, legislators, and bureaucrats who have contributed to the progression of sovereign state law. The application of law in a globalized world is still, to a considerable extent, at the discretion of these elites.134 State and nonstate laws are in a composite relationship; they are much more than merely opposing forces.

4.3. The adaptive power of state law

The processes of globalization force national legal authorities to take nonstate actors and transnational entities seriously. In an era when multiple, overlapping legal orders are increasingly accepted and respected, it is clear that sovereign state law is no longer nor necessarily the most powerful legal regime in every circumstance.135 The relatively diminished importance of the politically organized sovereign state has eroded certain “modern reference points” of legal theory.136 If transnational forces are breaking down traditional national borders, it is debatable whether sovereign state law can maintain the fiction of absolute sovereignty as well as its constitutional autonomy. The contention here, however, is that even if these claims are likely to fall prey to the changing circumstances of the world, this is by no means equivalent to the marginalization of state law.

After all, the state is a historical product of centuries of evolution. Development and transformation have always been “the order of the day.”137 State law has a remarkable capacity for co-opting and codifying other normative systems, assimilating them into its own system. For instance, it is capable of catering to global trends, such as political liberalization and social pluralization, by recognizing religious and customary norms and giving effect to nonbinding international standards like the United Nations Declaration on the Rights of Indigenous Peoples.138 State law is not isolated from societal developments. Judicial perceptions and legislative beliefs correlate, however slowly, with the normative changes in society. Conversely, state law plays a proactive role in modifying social norms by managing the ideologies of its constituent populations.139 These properties of state law are unlikely to change in any basic sense, even in an age of globalization. Backed by the political will of the coercive state apparatus, domestic legal systems constrain the choices of transnational actors. Furthermore, sovereign state law shapes the evolution of global legal norms.140

As long as the institutionalization of various kinds of transnational regulatory mechanisms endures, it is improbable that the perceived superior status of state law can be substantiated. Even so, the reaction of state legal actors to transnational effects should not be neglected. Governments are visibly, albeit implicitly, expanding their regulatory powers in the exercise of their internal sovereignty when they face external pressures.141 Networks of global civil society have provoked the state to strengthen its intrusion into previously neglected areas, such as the environment, water, and rights to land. These new forms of state power are frequently justified on the grounds of economic or technical progress. State authorities do not simply ignore the transnational challenge to their powers. Arguably, global processes do not dominate state institutions any more than the statist forces that defy globalization.142 In the wake of the state's reassertion of authority, evidence suggests that the “renationalization” of transnational law, including the lex mercatoria, is occurring.143 It is not surprising that state agencies, now organized as part of international or regional economic blocs, subject business actors and the lex mercatoria to greater pressure to obey national policies. Likewise, transnational financial law produced by communities of bankers is often reincorporated into sovereign state law.144

The persistence of state law correlates positively with the state's coercive influence over daily lives. State law is backed by the armed governing apparatus of the sovereign and is sustained by the rich resources of the state. In many instances, sovereign state law continues to be the most authoritative and precise normative framework. Nonetheless, the conventional division between state and nonstate law is fading. Traditional formalist and statist conceptions of law are no longer adequate. Analyses of law using the state as the exclusive focal point of the international system are unlikely to be theoretically rigorous.145 The relationships, similarities, and differences between state law and multilevel rules should be given more attention in the academy and the legal profession.

5. Conclusions

The international system has become less a state-centric, coordinative mechanism than a collectivity of specialized transnational regimes that penetrates into the political constitution of domestic polities. Technological advancements have accelerated the migration and transplantation of legal rules and practices. Nonstate actors like IGOs, INGOs, TNCs, and cross-border social movements have become significant actors in international governance. They have assumed the power to create transnational law that governs many dimensions of the political economy that was previously monopolized by the jurisdiction of the sovereign state.

Sovereignty is at the heart of both public international law and the legal constitution of the territorial state. Substantive changes in the international system unavoidably affect the shape of sovereignty and the future of state law. Indeed, in numerous cases, the state's effective monopoly on all legitimate coercive forces within its territory is no longer empirically defensible. The ability of state law to regulate transnationalized activities like cyber disputes and cross-border commercial transactions effectively is on the verge of decline. Nonetheless, the interplay between law and globalization is plagued by uncertainties.146 Global forces have brought about both intolerable inequality and new opportunities for exchange. The concept of global law is debatable precisely because it is both global and legal. In many respects, transnational norms assume regulatory powers at the expense of municipal legal systems. The relationship between nonstate and state law is further complicated by the deformalization of regulation. The legal norms originating from the less formal rule-making processes of nonstate international actors (including IGOs and lex mercatoria) is altering perceptions about what the notion of “law” really means.

The modern state and its law are transforming. Undoubtedly, transnational actors have profoundly influenced the content and character of municipal legal systems. However, the globalization of international governance is not about the marginalization of one legal order by another. After all, the homogenization of law on a global scale is largely speculative. A unified constitutional order of mankind is not in the making, at least in the foreseeable future. However, the state may at times strategically choose to comply with international and transnational norms instead of its own traditional state law; the adaptive power of state law should not be underestimated. It may focus less on maintaining sovereign claims to territorial supremacy and more on the protection of local practices and regional diversity. In the end, the fundamental functions of state law, in structuring the institutional architecture of the state, channeling wide-ranging national social policies, and responding to localized needs and conflicts, are irreplaceable. The interplay between the global and the local is far more complex than mere conflict. People who enact and enforce state law frequently shape nonstate law at the same time. Importantly, legal elites whose outlook is both local and transnational possess the extraordinary power to decide whether state or nonstate law is to be followed in a particular policy or situation.

The public imagination of a global takeover of sovereign rights provides national political elites with a resource to strengthen their existing powers and extend the state's regulatory influence into new areas. Domestic governments, which control the armed forces and important natural and economic resources, are unlikely to give up their vested interests unconditionally. In general, sovereign state law is strong and flexible enough to endure the many challenges ahead. Despite globalization, sovereign state law is likely to retain its political influence over the lives of the vast majority of peoples around the world.

IRPG 849 International Political Economy

Are nations’ political and economic sovereignty threatened by the forces of globalisation? What are nations doing to protect against erosion of national sovereignty?

Sebastian Plappert

The notion of sovereignty emerged along with the appearance of the modern state system, after the Peace of Westphalia ended the Thirty Years War in 1648. As a principle applying to all states, sovereignty refers to autonomous political authority exercised over a geographically determined territory (Krasner 1995, p. 115). In other words, sovereignty entitles a state to handle all its internal affairs as it pleases, without any external actors having a right to interfere within the borders of that state. Basically, this is valid for all political issues, including the application of force as well as all fiscal and economic regulations (Held 1989, p. 215). Accordingly, a main characteristic of a sovereign state is the ability to control movement across its borders (Krasner 2001, p. 231). Globalisation on the contrary, describes the integrational process of growing interdependence and the worldwide flow of ideas, goods, capital and people across national borders (Meyer 2007, p. 262). From an economic point of view globalisation refers to the emergence of one single world market transcending national boundaries; international production and transactions render territorial location meaningless (Scholte 2006, p. 602- 608).

However, this essay will argue that although globalisation alters the political and economical sovereignty of states, the concept of sovereign nations is far from being out of date. In order to support this thesis, arguments both for and against economic globalisation causing the dwindling of state sovereignty will be applied consecutively. Explanatory, special focus will be put on transnational corporations, global finance and international organisations as prominent economic features of globalisation. Emanating from a realist perspective, the paper will point out examples of how nations oppose unintended erosion of sovereignty.

Globalisation is said to threaten or even trigger the end of nation states, since the forces of a global market will override state sovereignty in the long run (Poggi 1990, p. 184). Since “state control over space and time is increasingly bypassed by global flows of capital, goods, services technology, communication, and information” (Castell 1997, p. 243), the global mobility of capital denationalises the circuits of accumulation (Robinson 2001, p. 159). This involves the worldwide fragmentation and decentralization of production according to global cost considerations (Robinson 2001, p. 160). The creation and growth of transnational firms has to be understood “as an aspect of a broader process of internationalization of capital” (Jenkins 2003, p. 429). Multinational corporations, being suited best for transnational relocations and market-shifts, have then again accelerated the integration of global economy even further (Kobrin 2001, p. 193). Since intra firm-trade between subsidiaries as well as growing interconnected investments criss-cross national borders, “it is no longer possible to regard each country as having its own separate economy” (Willetts 2006, pp. 430-432). Following Strange (1997, pp. 365-369), increasing globalisation will finally shift power from nation states to enterprises. The reasoning is “that footloose modern businesses will simply leave a country if a government does not pursue liberalizing policies which foster corporate profitability and flexibility” (Woods 2006, p. 339).

Relevant boundaries are only those “drawn by the deft but invisible hand of the global market” (Ohmae 1993, p. 78). Therefore, income tax dependant states are not sovereign anymore in the determination of domestic regulations concerning the economy. Politico-economic agendas are dominated by big businesses, predominantly international corporations, whereas states are downgraded to only provide basic social and public services (Hirst 1997, p. 409). Since companies operate increasingly on a transnational and multinational basis, “states are less autonomous; they have less exclusive control over the economic and social processes within their territories” (Hirst & Thompson 1995, p. 415).

“Underlying the transnational mobility of capital and the construction of global production networks is a radically globalized financial system, whose operation fundamentally” dimishes state sovereignty in the economic realm (Evans 1997, p. 6). Since “globalization has stimulated many companies to go beyond strategic coalitions to full-scale fusion”, merging transnational corporations control more than 70 per cent of all foreign direct investment worldwide (Scholte 1997a, p. 437). Although states are interested to attract and maintain the ingoing flow of capital boosting their economy, this process also renders the enmeshed national economic systems manipulable by external financial speculations.

The argument is that “floating exchanges rates have created extreme currency instability, which in turn has created an enormous” amount of money operating completely independent from any economic activity like production, trade or even investment (Drucker 1997, p. 162). Derivates exchanges, for example, trade with contracts about future options on a fixed price and currency of particular products and shares on a speculative basis (Scholte 2006, p. 612). As Cable (1995, p. 27) points out, “foreign exchange trading in the world’s financial centres exceeds a trillion dollars a day […, which is] greater than the total stock of foreign exchange reserves held by all governments”. Therefore, groundless and unpredictable movements of that virtual money in and out of a currency greatly impact on national economics (Drucker 1997, p. 162, Quiggin 2001, p. 70). Evans (1997, p. 7) claims that, “any state which engages in policies deemed "unwise" by private financial traders will be punished by seeing the value of its currency decline and its access to capital shrink”.

Moreover, operating ‘offshore’, any profit generated by swift relocation of digital assets, exists “beyond the reach of onshore regulation” (Hudson 2000, p. 270). In other words, by operating from the outside of a particular nation state the money passes through, capital is not bound by national tax or secrecy regulations (Palan 2002, p. 155). Since already in the 1990’s “as much as half of the worlds stock of money either resides in or is passing through [offshore] tax havens” (Kochen 1991, p. 73), states are not only vulnerably to the unstable flow of capital, but also unable to control its profits. Accordingly, Chapman (2007, p. 169) concludes that together with the vast capacities of transnational capital, “the emergence of offshore and the wider internationalisation of finance had brought about the end of popular sovereignty and thus the idea of the nation-state”.